EPF defends mall deal

KUALA LUMPUR: The Employees Provident Fund (EPF) has shed some light on the deal to acquire a retail mall in Jalan Sultan Ismail for RM1.2 billion, saying that the purchase is subject to certain conditions.

It was reported on Monday that Quill Retail Malls Sdn Bhd (QRM) is selling the retail mall portion of the abandoned “Vision City" development to the EPF, as it seeks to revive the partly completed project, which used to belong to the Rashid Hussain Bhd (RHB) group.

The revived development will be called Quill City and it will comprise a residential component, 40-storey office tower, and the mall. QRM is part of the Quill group of companies, which is linked to Datuk Michael Ong and Datuk Dr Jennifer Low.

Following the news report on the sale of the retail mall to the EPF, several quarters, including PAS' research head Dr Dzulkefly Ahmad, had questioned the wisdom behind the deal.

Some of their major contentions include the pricing, which translates into RM1,561 psf, for the abandoned project, and the commercial yield the EPF can expect to receive from its investment.

The EPF said in a statement yesterday that its investment in the Quill City Mall is conditional upon physical completion of the mall, according to the specifications agreed, within three years.

"In addition to the?completion of the mall, a minimum of 70% occupancy at an agreed sustainable minimum commercial yield over the long term must be met," said Malaysia's largest employees savings fund.

It said no payment will be made for the proposed acquisition until all the agreed conditions are fulfilled, and the assets achieve the long term yield that has been agreed upon.

However, the EPF did not state the agreed sustainable minimum commercial yield the mall has to achieve over the long term period.

"The final value of the investment will only be determined in the period after the mall begins operations and is subject to the investment reaching pre-agreed revenue and profit targets over a period of several years.

"The price referred to in the news report is the maximum sum payable but will only be paid if all the performance targets are met within the agreed timeframe," stressed the EPF.

In July 2007, RHB sold the seven-acre site, together with all the properties and structures that have already been completed, to QRM for RM430 million cash.

RHB Bhd had then gone through a privatisation exercise which saw the EPF emerging with a 63.56% stake in RHB Capital Bhd. RHB was subsequently delisted following the privatisation.

Before the construction of Vision City stalled due to the Asian financial crisis, three office blocks and several structures, including the basement parking lot and parts of the retail podium, had already been completed.

One of the office blocks now houses the city branch of Universiti Kuala Lumpur, while the rest have been been rented out.  

The EPF said in its statement it has always been positive about exploring good investment opportunities in the real estate sector.

Besides the pending investment in Quill Mall, the EPF also owns stakes in several property development companies and real estate investment trusts (REITs).

"The EPF's latest retail investment is in Paradigm Mall [in Kelana Jaya] of which it is co-owner," it said.

In 2005, it acquired properties owned by hypermarket operator Giant TMC Bhd.

The fund also owns the Sogo department store at Jalan Tuanku Abdul Rahman here.

"Moving forward, the EPF shall continue to invest in retail malls and other real estate sub-sectors as long as the investment is consistent with our objectives of achieving a positive income stream in the long run," it added.  

This article first appeared in The Edge Financial Daily, on July 3, 2013.

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